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Banks’ capital profuse, but they still hold capital back   2008-11-03 - TBKTVN

Bank’s usable capital is now in excess, but banks still try to hold capital back instead of pushing up the disbursement.


Businesses cannot reach for capital


The latest report by the State Bank of Vietnam shows that banks now have VND 50 trillion in excessive capital. However, this does not mean that businesses will be able to access the bank loans.


Hoang Viet Trung, Deputy Director of the Hanoi Branch of the State Bank of Vietnam, acknowledged that businesses are still facing difficulties in accessing bank loans.


According to Trung, the local banks had mobilized VND 400 trillion by the end of October, while the total outstanding loans had reached only VND 250 trillion.


The main reason behind the low outstanding loans, according to Trung, is that banks have been trying to tighten the loaning conditions for fear of bad debts.


Le Xuan Nghia, Director of the Banking Development Strategy Department under the State Bank of Vietnam said: “Banks are now looking at businesses with doubtful eyes, therefore, they hesitate to ‘open their purse strings’ to lend to businesses.”


However, experts have urged banks to push up loaning to rescue a lot of businesses in danger of bankruptcy because of no capital. Dr. Cao Cu Boi from the Hanoi National Economics University, said that banks cannot slash lending interest rates sharply right now, but they need to become ‘flexible and light-handed’ in controlling credit quality.


“Businesses are thirsty for capital, while the credit growth rate is limited at 30% over the previous year,” Boi said.


Former Trade Minister Truong Dinh Tuyen said that he believes the highest credit growth rate would be 25%, and that there is no need to set up the limit of 30% credit growth rate for this year.




Nghia said that the State Bank of Vietnam has pumped more capital to commercial banks through monetary policies, but commercial banks have not provided capital to businesses. What have they done with the money? They have injected it in to bonds.


Sources said that the capital flow from commercial banks to bonds has increased sharply. Banks find it safer to invest in bonds than lending to businesses. This is because the bond yield of 16-16.8% proves to be relatively attractive for banks.


In the first six months of the year, banks once faced serious difficulties in capital sources and liquidity. The big difficulties have made banks accustomed to being very cautious with lending. That explains why banks still hesitate to push up lending, though the credit growth rate has reached 19% only (the ceiling level is 30% for this year).


A banker said that banks have every reason to remain cautious with their disbursement plans, as the difficulties of the national economy have been affecting their business and payment capabilities.

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